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Medicare payment adviser backs bidding for equipment, cuts for imaging services

Medicare should require more competitive bidding for suppliers of wheelchairs, hospital beds and other durable medical equipment to reduce costs, according to a report by Congress' chief adviser on the U.S. government's health insurance program for the older and disabled Americans.

The report also recommended cutting payments to some urban emergency departments and for some procedures and imaging services.

The Medicare Payment Advisory Commission, or MedPAC, is an independent agency established by the Balanced Budget Act of 1997. The commission is required to produce reports each year in March and June advising lawmakers not only on reimbursement policy but on access to treatment, quality of care and other issues related to Medicare.

The competitive bidding program for durable medical equipment, prosthetics, orthotics and supplies has reduced spending on such products by an average of 50% for some of the most expensive items, MedPAC said. Such items include oxygen concentrators, blood glucose testing strips and continuous positive airway pressure, or CPAP, devices.

Medicare could save more money if more the competitive bidding program were expanded to include products such as automatic external defibrillators, urinary catheters, certain power wheelchairs and select orthotics. In 2015, almost half of all durable medical equipment spending was for products excluded from competitive bidding, the commission said.

Cutting emergency department payments

MedPAC also proposed a 30% cut in the rates paid to urban emergency rooms that are not at hospitals and are within 6 miles of an on-campus hospital emergency room.

The recommendation, which is opposed by the American Hospital Association, came in response to concerns over the proliferation of stand-alone emergency rooms, which do not treat cases that are as serious as the ones treated by hospital emergency rooms but receive the same rates, MedPAC staff said at a commission meeting in April.

Large medical systems have been opening more stand-alone emergency rooms because they can receive the same funding as hospital-based ERs yet are cheaper to operate because they have no operating rooms, trauma teams or specialists on call.

The Congressional Budget Office estimates that reducing the payments would save the healthcare program between $50 million and $250 million annually, MedPAC principal policy analyst Zachary Gaumer told the agency's commissioners at the April 5 meeting.

Isolated, rural stand-alone emergency departments that are more than 35 miles from another emergency department should be permitted to bill standard fees under Medicare's outpatient payment system and should receive annual payments to assist with fixed costs, MedPAC said in its June report.

Physician fee adjustments

The government program should also make changes in its physician fee schedule to increase reimbursements for evaluation and management services, which enable doctors and nurses to manage chronic conditions and develop care plans. Such services are underpriced compared with other services such as procedures and tests, which should be reduced so that overall costs would not rise, MedPAC said.

"Because of advances in technology, efficiency improves more easily for procedures, imaging, and tests than for ambulatory E&M services, which are defined in large part on clinicians' time, and so do not lend themselves to efficiency gains," the commission wrote.

For example, MedPAC said a 10% increase in payments for evaluation and management services would boost spending by $2.4 billion. To counter that, payment rates for all other services on the fee schedule should be cut by 3.8%, the commission said. That would result in higher payments for family physicians, endocrinologists and rheumatologists, while other specialists, including pathologists and occupational therapists, would be faced with reduced income.